How to be a Founder Friendly Investor?

The One Percent Project hosted by Pritish Sanyal is a series of conversations that will help you understand how some of the smartest minds build, scale and implement new ideas and ventures. Sanjay Mehta, Founder and Partner at 100X.VC shares his learnings from startup investing, ethos of 100X.VC and his advice for new angel investors & VCs on brand building and mentorship. 

Learnings from years of Investing

With over a decade of startup investing, Sanjay remarks that it has been a journey of continuous learnings. Every deal teaches you more things. He highlights a couple of key learnings on the investor side-

1. Building a good relationship is important for building a good business-

2. A conscious effort to be a founder friendly investor, to be interested in working with entrepreneurs and to see them become successful without compromising on your own metrics as a VC.

3. Risk is 1X, upside is unlimited is the name of the game

iSAFE Investing through 100X.VC

Sanjay got exposed to Safes in Silicon Valley where a lot of deals were happening. He decided to take inspiration from it and customize it to the Indian Laws. Since the focus of 100X.VC was to do volume investing- trying to invest in 100 companies every year- iSAFEs were a perfect fit for the kind of speed that was required which traditional onerous SHAs didn’t offer.

Code of Promise

Sanjay recalls what happened in Class 01 of his portfolio investments in 100X.VC, where he saw one deal, where the VC didn't want angels to participate even though there were commitments already made. To safeguard the interests of investors who are committing smaller cheques, 100X.VC introduced the code of promise for its Class 02 portfolio.

While the documentation of investment is still in progress, the code of promise acts as an ethical and moral promise between both investor and founder to close the deal at the agreed terms. 100X.VC, being a startup discovery platform, Sanjay wants to ensure that every investor gets a fair share of their exposure with startups that they like.

Advice to New Angel Investors and VCs

Sanjay who regularly conducts venture capital and angel investing workshops loves sharing his experiences to address the shortage of investors available who can lead an early-stage deal with conviction and put a large cheque in.

Secondly, he believes that helping founders through mentorship can create one’s own brand and reputation which attracts proprietary deals through founder referrals thereby setting up a very rewarding cycle.

Thirdly, one must constantly update and refine their investment thesis based on past decisions, anti-portfolio and missed opportunities.

Painkillers or Vitamins? The ‘So-what’ Strategy

Startups that are painkillers are quicker to move, faster to close and adopt. While vitamins are also necessary they lack the urgency of adoption that painkillers bring with them. Customers are always searching for painkillers so should investors.

Let's say for example, a startup founder says, “I’ve built 128-bit security”

Sanjay would simply ask, “So what?”

“It’s unbreakable security.”

“So what?”

“If you’re using a credit card online, the 128-bit security makes it unbreakable”

Now, here is a product which is converted into business.

So, that's when one should get more interested to invest. Once there is a product and a user, look for traction, retention etc to see if it sounds like a good investment. 

 To listen to the full podcast, click here.

- 100X.VC Team

Published on: December 24, 2020